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JPMorgan Chase & Co. reported a 35% rise in third-quarter profit, as the largest U.S. bank continued to benefit from higher interest rates and lower-than-normal loan losses.
The bank said on Friday that net profit climbed to $13.2 billion from $9.7 billion a year ago. That was better than analysts’ expectations of $11.9 billion, according to data compiled by Bloomberg.
JPMorgan CEO Jamie Dimon said in a statement that earnings were “solid” but acknowledged that “these results were driven by superior earnings on our net interest income and below normal credit costs, both of which Both will normalize over time.”
In warning about the conflict between Ukraine and Israel, Dimon said “this may be the most dangerous period the world has seen in decades.” Dimon’s views on world affairs are closely watched across Wall Street.
JPMorgan shares rose 0.9% in premarket trading in New York.
As with the previous quarter, much of the growth was driven by net interest income, which was $22.7 billion, 30% higher than the same period last year. The figure topped analysts’ expectations of $22.4 billion, as JPMorgan continued to benefit from the Federal Reserve’s rate hike cycle and the bank’s emergency acquisition of First Republic.
JPMorgan raised its 2023 net interest income target excluding its trading unit to about $89 billion from about $87 billion.
Net interest income is the difference between what a bank pays out on deposits and what it earns from loans and other assets. Over the past 18 months, big banks such as JPMorgan Chase & Co. have been able to charge higher lending rates without offering savers substantially higher interest rates on deposits.
In an effort to further boost profits, JPMorgan released $113 million in reserves it had set aside for potential losses, confusing analysts’ expectations that the bank would add about $850 million more in reserves.
JPMorgan Chase continued to benefit from relatively low loan losses in the quarter. Net charge-offs (labeled as the portion of lost loans that cannot be recovered) totaled $1.5 billion, more than double the year-earlier level but up only 6% from the second quarter.
On an annualized basis, JPMorgan wrote off 47 cents for every $100 it lent, net of the fees it recouped.
Since the early months of the Covid-19 pandemic, loan losses have been at historically low levels due to government stimulus packages. But while a series of rate hikes by the Federal Reserve have boosted JPMorgan’s loan profits, there are concerns that higher rates will put pressure on borrowers.
JPMorgan Chase lowered its net charge-off rate forecast for its credit card services business to about 2.5% from 2.6%, indicating a better-than-expected credit environment for U.S. consumers.
It also lowered its full-year spending guidance to about $84 billion from about $84.5 billion.
JPMorgan Chase reported investment banking fees of $1.7 billion, down 3% from a year earlier but exceeding analysts’ expectations of $1.6 billion.
Industry leader JPMorgan Chase & Co. joined Citigroup and Wells Fargo in reporting earnings. Bank of America and Goldman Sachs are due to report results on Tuesday, while Morgan Stanley reports on Wednesday.
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